Credit-crunched Britons "40,000 pounds worse off"

LONDON (Reuters Life!) - The average Briton is 40,000 pounds ($56,150) worse off because of the credit crunch, as house prices and stock markets slump, a report said on Monday.

<p>A pile of one pound coins is seen, in central London June 17, 2008. REUTERS/Toby Melville</p>

An analysis by consultants PricewaterhouseCoopers said the economic crisis had erased 1.9 trillion pounds of Britain’s household wealth since July 2007.

A 20 percent fall in house prices had cost 800 billion pounds while the estimated loss on equities from the sharp fall in stock markets was put at 1.1 trillion pounds.

John Hawksworth, head of macroeconomics at PricewaterhouseCoopers, said that meant the wealth of an average person would have dropped by around 28 percent.

“Translating these figures to a more individual perspective, the estimated loss of wealth of 1.9 trillion pounds would equate to around 40,000 pounds on average per adult in the UK,” he said.

While the level of losses would vary considerably, Hawksworth said they could result in a cut in total annual household expenditure of around 45 billion pounds, the equivalent to about 5 percent of household spending.

“The knock-on effect of this level of wealth destruction will result in significantly more belt-tightening and reduced spending by households over the next year and this situation could be exacerbated by expected further falls in house prices over this period,” he said.

However, positive effects of recent interest rate cuts, increases to the money supply and other fiscal stimulus measures announced by the government could see an economic recovery later in 2010 and beyond, he added.